2017 (6) TMI 967 - AT - Central Excise

MODVAT/CENVAT credit - duty paying documents - whether Modvat/Cenvat credit can be taken on inputs which are received on the strength of bills/ Challan of Sugar division? - Held that - credit cannot be denied only on the ground that invoice was in the name of self - credit allowed. CENVAT credit - loss in transit - whether the Cenvat credit is admissible on the inputs (Molasses, lost in transit) not received in the factory, not finally utilized for the manufacturing of final products, which are stated to be transit or handling loss? - Held that - the quantum of Molasses lost in this case, being admittedly less than 1%, is a normal loss and no Cenvat credit relating to the same can be disallowed, as the inputs lost in normal course of business and transport-transit are held to be utilized for manufacture of taxable output/ goods - credit allowed. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether Modvat/Cenvat credit can be taken on inputs received on the strength of bills/Challan of another division.
2. Whether Cenvat credit is admissible on inputs lost in transit or handling loss before being utilized for manufacturing final products.

Analysis:

Issue 1:
The appellant, a company with separate units, availed Cenvat credit on Molasses received from the sugar division by the chemical division. The Revenue alleged that the sugar unit retained duty paid Molasses without proper permission and transferred them to the chemical division using Non-statutory Challans/Bills. Show Cause Notices were issued proposing to disallow the Cenvat credit. The Order-in-Original disallowed the credit on the grounds of improper documents. The Tribunal observed that Cenvat credit can only be taken on inputs used in manufacturing final products. The appellant argued that a previous Tribunal order allowed credit based on self-invoices for transferred molasses. The Tribunal held that the credit on Molasses lost in transit, being less than 1%, is a normal loss and should not be disallowed. The appeal was allowed, granting the appellant consequential benefits.

Issue 2:
Regarding the second issue of Cenvat credit on inputs lost in transit, the appellant argued that the loss is normal and within permissible limits. They cited relevant rules and circulars allowing for a certain percentage of transit loss. The appellant contended that the lost inputs were utilized in the production of final products and should not be disallowed. The Revenue relied on the impugned order disallowing the credit. After considering the contentions, the Tribunal held that the loss of Molasses, being less than 1%, is normal and should be considered as utilized for manufacturing taxable goods. The Cenvat credit disallowed on this basis was allowed, and the appellant was entitled to consequential benefits as per law.

In conclusion, the Tribunal allowed the appeal on both issues. The appellant was granted Cenvat credit for inputs received on the strength of Non-statutory Challans/Bills and for inputs lost in transit, considering the loss as normal and within permissible limits. The decision was based on precedents and relevant legal provisions, ensuring the appellant's entitlement to consequential benefits.